Bando Chemical Industries is Japan’s largest manufacturer of power transmission^* and conveyor belts. The Japanese market for power transmission belts is worth about JPY50.0bn and the global market about JPY400.0bn (Shared Research estimates based on Ministry of Economy, Trade and Industry [METI] data; market price basis). While the domestic production shipment value for such products has declined from JPY55.1bn in 2011 to JPY42.9bn in 2020 (compound annual decline rate of 2.5%), the overseas market is worth 6–7x the domestic market by our estimates, and therefore offers considerable room for growth. Bando has a leading domestic market share of about 50% in accessory drive belts^** for automobiles, and a global market share of roughly 20%, making it the world’s third largest supplier of such products (Shared Research estimate). In non-automobile products, the company leads the global market for variable speed belts with a share of over 50%. These are used extensively by Honda Motor (TSE1: 7267) in its motorcycles, especially small scooters.

^*Power transmission belts: Belts that transmit power from engines or motors by running over pulleys (disc-shaped objects). They are widely used in automobiles, agricultural machinery, general industrial machinery, and office automation (OA) equipment. According to Bando, the high-end segment of the power transmission belt market is controlled by a group of eight companies in which it is included. This market is poised for realignment driven by the growing trend toward the electrification of vehicles, and especially the rise of electric vehicles (EVs) that do away with traditional engines.
^**Accessories: A general term for peripheral devices that are necessary to drive the main engine of a vehicle.
^***Automotive power transmission belts: These come in two major types: accessory drive belts (fan belts) and synchronous belts. Accessory drive belts drive accessories such as alternators, power-steering pumps, and water pumps. Accessory drive belts used in passenger vehicles are generally V-ribbed belts, while those employed in trucks are predominantly V-belts. Synchronous belts, which rotate camshafts (rods responsible for opening and closing engine valves at the appropriate times), have seen a decline in usage in recent years. When a belt is damaged, the transmission of power to various parts is lost, resulting in a vehicle that can no longer drive.

In FY03/21, revenue was JPY81.4bn and core operating profit JPY4.9bn. By segment, the mainstay Automotive Parts segment made up 43.0% of total revenue (48.3% of total core operating profit), the Industrial Products segment 37.1% (45.3%), the Advanced Elastomer Products segment 14.6% (core operating loss of JPY129mn), and the Other Business segment 5.4% (6.9%). Shared Research estimates belt-related revenue totaled roughly JPY65.0–68.0bn, 20–25% above the JPY54.4bn reported by Mitsuboshi Belting (TSE1: 5192), the second-largest belt supplier in Japan.

In FY03/21, overseas revenue was JPY39.2bn (48.2% of total revenue; CAGR of 1.2% from JPY34.7bn in FY03/11). Asia accounted for 37.3%, and Europe, the US, and all other regions for 11.0%. Bando has been active overseas for many years. It set up representative offices in the US and Germany in 1969, converted both into local subsidiaries in 1978, and subsequently moved into Asia. Drawing on the insights gained from these early overseas forays, it has expanded its overseas presence with a focus on Asia. Today, Bando operates a global supply structure with four strategic regions: Asia (17 bases), North America (two bases), Europe (three bases), and Japan. The company continually looks for opportunities to grow its overseas operations in existing and new regions, and monitors the efficiency of its existing bases. It plans to further increase its footprint abroad while adjusting its number of overseas bases. Shared Research understands that Bando generates nearly half of its core operating profit from its overseas business, mainly from its operations in Asia, where the company can capture demand for automotive, motorcycle, and agricultural machinery products. Incidentally, the first overseas plant of a Japanese automaker came online in the UK in 1982.

Accessory drive belts for automotive engines (chiefly V-belts and V-ribbed belts) are functional products made of rubber or urethane. They are consumables that deteriorate in proportion to the distance traveled. For this reason, accessory drive belts supplied for new vehicles inevitably generate replacement demand after a few years, contributing to sales of repair parts. Repair parts can be broken down into genuine parts supplied directly to automakers, and own-brand products supplied to car product retailers and repair shops via specialist trading companies. Bando commands a high share of the domestic market for repair parts, and domestic car ownership—an indicator of latent demand for repair parts—has consistently trended up over the last 10 years, reaching a record-high 78.3mn vehicles at end-March 2021. In addition, the average period car owners hold on to their vehicles has lengthened (from 9.26 years in 1990 to 13.87 years in 2021, in the case of passenger vehicles), and this has fueled high levels of replacement demand.

Accessory drive belts must meet certain benchmarks in terms of durability, thermal resistance, quiet operation, lightweight design, and low costs. Achieving these requires compounding, dispersion, and combining technologies for raw materials, and Bando possesses proprietary materials processing technologies. Raw materials costs are the largest component of its manufacturing costs (roughly 50%), and changes in the naphtha price affect its earnings with a lag of three to four months. While Bando generally attempts to pass on increases in raw material prices to its customers (mainly automakers), it is not always able to avert short-term impact. However, because its materials processing technologies often give it an edge in price negotiations, the company is sometimes able to increase prices midway through a fiscal year. Conversely, drops in raw material prices drive up earnings, but also gradually increase downward pressure on prices from customers.

In the Industrial Products segment, the second earnings driver behind the Automotive Parts segment, the company mainly supplies power transmission belts for industrial machinery, power transmission belts for agricultural machinery, and conveyor belts. It excels particularly in products for agricultural machinery, which Shared Research estimates make up roughly 15–20% of the segment revenue. This strength is largely the product of Bando’s early forays in Asian markets, where it has capitalized on growing demand for such products. Bando supplies its products for industrial machinery nearly exclusively through trading companies, with supply being dictated by orders from these companies. The core operating profit margin in the segment averaged 6.4% over the last five years, lagging the 7.2% for the Automotive Parts segment by only about 1pp.

In the Advanced Elastomer Products segment, precision functional parts account for roughly 65% of segment revenue. The bulk of these are OA equipment parts such as cleaning blades and high-performance rollers for printers and copiers. The remaining 35% of segment revenue comes from parts such as surface films for construction materials and films for medical applications. Unlike parts for automotive or industrial applications, OA equipment parts generate little replacement demand, and struggle due to the impact of dwindling demand for paper-based printing. In the non-reportable Other Business segment, Bando engages in medical equipment and robotics-related devices operations. The core medical equipment operations are mainly handled by a subsidiary that was brought into the group through an acquisition.

Earnings trends

In FY03/22, revenue was JPY93.7bn (+15.2% YoY), core operating profit was JPY5.9bn (+19.1% YoY), operating profit was JPY2.7bn (-50.4% YoY), and profit attributable to owners of the parent was JPY1.2bn (-69.3% YoY). Revenue and profit were up across all three major segments, and the core operating profit margin was 6.3% (+0.2pp YoY). In Q4 (January–March 2022), the company recorded one-time operating expenses of JPY1.3bn, but core operating profit rose for the first time in two years. Similarly, the company booked JPY4.3bn in impairment losses in Q4, causing operating profit and bottom-line profit to drop YoY. The company plans to award annual dividends of JPY40.0 per share (JPY26.0 per share in FY03/21), resulting in a temporarily high payout ratio of 148.6%.

The company’s forecast for FY03/23 calls for revenue of JPY95.0bn (+1.3% YoY), core operating profit of JPY7.0bn (+19.0% YoY), operating profit of JPY7.5bn (approximately 2.8x the FY03/22 amount), profit attributable to owners of the parent of JPY5.0bn (4.1x), and EPS of JPY112.3. Assuming growth across all three main segments, including Automotive Parts, the company forecasts record-high levels of revenue, core operating profit, and operating profit (since moving to IFRS). The company also expects a record-high core operating profit margin, of 7.4%. The company anticipates annual dividends of JPY44.0 per share, which would result in a payout ratio of 39.2%.

Bando embarked on its medium- to long-term management plan “Breakthroughs for the future” in FY03/14. It has completed the first stage of the plan (BF-1: FY03/14–FY03/18) in FY03/18, and entered the fourth year of the plan’s second stage (BF-2: FY03/19–FY03/23). In the BF-2 stage, it aims to prioritize new business creation while focusing on core business expansion, enhancement and evolution in manufacturing, and work style innovation for both individuals and the organization. To offset the waning use of automotive power transmission belts due to the electrification of vehicles, the company plans to promote the adoption of its products in new fields, persuade customers to switch over to its belts, and create new businesses such as electronic products and medical and healthcare equipment. By FY03/23, Bando targets revenue of JPY120.0bn (JPY90.8bn in FY03/18), core operating profit of JPY12.0bn (JPY6.7bn), and ROE of 12.0% (8.3%). It also looks to bring the revenue share for new businesses and products up to 30%.

Strengths and weaknesses

Shared Research thinks the company has the following strengths:

Leading position in niche market, and ability to maintain barriers to entry via proprietary materials processing technologies developed as a chemicals manufacturer

Business model that generates reliable replacement demand for belts, contributing to sales of repair parts

Strong business foundations overseas, especially in Asia, developed by taking advantage of insights from early overseas forays

We think it has the following weaknesses:

Structural challenge mainly in the form of dwindling demand for automotive power transmission belts driven by the growing adoption of electric vehicles (EVs) and full-hybrid vehicles

Lower profitability than competitors due to a broad range of products supplied through core belt operations and an insufficient focus on specific products

Difficulty applying the business model of its Automotive Parts segment, which generates profit from repair parts, to its office automation equipment-related operations due to a gradual decline in demand for printing caused by the transition to paperless offices

Key financial data

Income statement		FY03/14	FY03/15	FY03/16	FY03/17	FY03/18	FY03/19	FY03/20	FY03/21	FY03/22	FY03/23
(JPYmn)		J-GAAP	J-GAAP	J-GAAP	J-GAAP	IFRS	IFRS	IFRS	IFRS	IFRS	IFRS
Revenue (IFRS)						90,798	94,318	90,247	81,371	93,744	95,000
	YoY					-	3.9%	-4.3%	-9.8%	15.2%	1.3%
Gross profit						27,526	27,562	27,065	24,851	27,662
	YoY					-	0.1%	-1.8%	-8.2%	11.3%
	Gross profit margin					30.3%	29.2%	30.0%	30.5%	29.5%
SG&A expenses						20,837	21,059	21,813	19,912	21,782
	YoY					-	1.1%	3.6%	-8.7%	9.4%
	SG&A ratio					22.9%	22.3%	24.2%	24.5%	23.2%
Core operating profit						6,688	6,503	5,252	4,938	5,880	7,000
	YoY					-	-2.8%	-19.2%	-6.0%	19.1%	19.0%
	Core operating profit margin					7.4%	6.9%	5.8%	6.1%	6.3%	7.4%
Other operating income						244	327	245	240	446
Other operating expenses						527	920	4,123	323	4,685
Operating profit						7,156	6,815	2,056	5,377	2,665	7,500
	YoY					-	-4.8%	-69.8%	161.5%	-50.4%	181.4%
	Operating profit margin					7.9%	7.2%	2.3%	6.6%	2.8%	7.9%
Pre-tax profit						6,899	7,166	2,095	5,618	3,414
	YoY					-	3.9%	-70.8%	168.2%	-39.2%
	Pre-tax profit margin					7.6%	7.6%	2.3%	6.9%	3.6%
Income tax expenses						1,763	1,676	1,394	1,660	2,197
	Effective tax rate					25.6%	23.4%	66.5%	29.5%	64.4%
Profit attributable to owners of the parent						5,100	5,457	682	3,943	1,211	5,000
	YoY					-	7.0%	-87.5%	478.2%	-69.3%	312.9%
	Profit margin					5.6%	5.8%	0.8%	4.8%	1.3%	5.3%
Revenue (J-GAAP)		93,434	95,395	93,272	88,387	91,263
	YoY	8.9%	2.1%	-2.2%	-5.2%	3.3%
Gross profit		24,723	25,399	27,175	26,791	27,532
	YoY	10.1%	2.7%	7.0%	-1.4%	2.8%
	Gross profit margin	26.5%	26.6%	29.1%	30.3%	30.2%
SG&A expenses		19,206	20,601	21,214	20,895	21,196
	YoY	4.6%	7.3%	3.0%	-1.5%	1.4%
	SG&A ratio	20.6%	21.6%	22.7%	23.6%	23.2%
Operating profit		5,517	4,797	5,960	5,896	6,336
	YoY	34.8%	-13.1%	24.2%	-1.1%	7.5%
	Operating profit margin	5.9%	5.0%	6.4%	6.7%	6.9%
Recurring profit		6,103	5,730	6,363	6,571	6,598
	YoY	27.7%	-6.1%	11.0%	3.3%	0.4%
	Recurring profit margin	6.5%	6.0%	6.8%	7.4%	7.2%
Net income attributable to owners of the parent		4,280	3,758	4,386	4,951	4,795
	YoY	70.5%	-12.2%	16.7%	12.9%	-3.2%
	Net margin	4.6%	3.9%	4.7%	5.6%	5.3%
Per-share data (split-adjusted; JPY)
Shares outstanding (ex. treasury shares; year-end; '000)		47,214	47,214	47,214	47,214	47,214	47,214	47,214	47,214	47,214	-
EPS (JPY)		91.0	79.9	93.3	107.9	111.4	119.1	14.9	86.6	26.9	112.3
EPS (fully diluted; JPY)		-	-	-	-	-	-	-	-	-	-
Dividend per share (JPY)		20.0	20.0	24.0	26.0	30.0	32.0	32.0	26.0	40.0	44.0
Book value per share (JPY)		1,036.8	1,196.7	1,168.5	1,276.5	1,419.3	1,480.1	1,398.8	1,546.9	1,620.2	-
Balance sheet (JPYmn)
	Cash and cash equivalents	13,192	16,199	16,980	19,522	18,476	17,530	14,493	18,863	18,837
Total current assets		45,540	49,119	47,520	52,801	53,498	53,564	48,822	53,660	59,200
Tangible fixed assets		30,822	31,089	29,486	29,137	32,762	32,597	33,913	32,880	32,954
Intangible assets		1,059	1,374	1,188	1,548	1,887	1,833	13,392	13,014	8,528
Investments and other assets		12,199	13,115	12,568	13,207	15,099	14,562	14,169	16,728	15,698
Total assets		89,622	94,699	90,765	96,695	103,246	102,557	110,297	116,282	116,381
	Short-term debt	5,571	4,717	5,047	4,499	2,952	2,806	7,772	8,888	4,569
Total current liabilities		26,785	25,971	24,980	24,773	26,022	24,232	25,829	27,658	28,520
	Long-term debt	10,182	9,769	7,513	10,913	9,365	7,780	16,311	13,297	11,912
Total fixed liabilities		13,560	11,952	10,580	13,181	12,015	10,192	20,558	17,860	15,432
Total liabilities		40,345	37,923	35,560	37,954	38,037	34,424	46,387	45,519	43,952
	Shareholders' equity	48,772	56,274	54,786	60,351	64,974	67,871	63,648	70,492	72,134
Total net assets		49,276	56,776	55,204	60,574	65,209	68,132	63,909	70,763	72,429
Total interest-bearing debt		15,753	14,486	12,560	15,412	12,317	10,586	24,083	22,185	16,481
Cash flow statement(JPYmn)
Cash flows from operating activities		6,459	8,061	9,038	6,799	9,183	6,602	8,847	10,172	9,591
Cash flows from investing activities		-5,037	-3,931	-4,184	-4,638	-5,008	-4,575	-14,122	-2,766	-534
Cash flows from financing activities		-1,548	-2,472	-3,049	422	-4,588	-3,133	2,726	-3,633	-9,942
Financial ratios
ROA (RP-based)		7.1%	6.2%	6.9%	7.0%	6.9%	7.0%	2.0%	5.0%	2.9%
ROE		9.4%	7.2%	7.9%	8.6%	8.1%	8.2%	1.0%	5.9%	1.7%
Equity ratio		54.4%	59.4%	60.4%	62.4%	62.9%	66.2%	57.7%	60.6%	62.0%
R&D expenses		3,590	3,834	4,244	4,298	4,375	4,459	4,421	4,094	-	-
Capital investment		5,046	4,198	4,675	4,558	5,130	4,706	5,626	4,558	-	-
Depreciation		4,174	4,385	4,321	4,101	4,352	4,489	5,995	5,973	5,892	-

Source: Shared Research based on company data
Note: The company conducted a 1-for-2 reverse stock split on its common shares on October 1, 2016.

Trends and outlook

Quarterly trends and results

Cumulative		FY03/21				FY03/22				FY03/22
(JPYmn)		Q1	Q1–Q2	Q1–Q3	Q1–Q4	Q1	Q1–Q2	Q1–Q3	Q1–Q4	% of Est.	FY Est.
Revenue		17,399	37,116	58,619	81,371	23,016	46,144	69,646	93,744	104.2%	90,000
	YoY	-25.1%	-19.7%	-14.8%	-9.8%	32.3%	24.3%	18.8%	15.2%		10.6%
Gross profit		4,969	11,022	17,840	24,851	7,387	14,693	21,732	27,662
	YoY	-27.3%	-20.7%	-13.3%	-8.2%	48.7%	33.3%	21.8%	11.3%
	Gross profit margin	28.6%	29.7%	30.4%	30.5%	32.1%	31.8%	31.2%	29.5%
SG&A expenses		4,884	9,696	14,614	19,912	5,221	10,317	15,441	21,782
	YoY	-12.3%	-11.6%	-10.2%	-8.7%	6.9%	6.4%	5.7%	9.4%
	SG&A ratio	28.1%	26.1%	24.9%	24.5%	22.7%	22.4%	22.2%	23.2%
Core operating profit		84	1,325	3,225	4,938	2,166	4,376	6,291	5,880	98.0%	6,000
	YoY	-93.4%	-54.9%	-25.1%	-6.0%	2,478.6%	230.3%	95.1%	19.1%		21.5%
	Core operating profit margin	0.5%	3.6%	5.5%	6.1%	9.4%	9.5%	9.0%	6.3%		6.7%
Operating profit		86	1,436	3,481	5,377	2,328	4,847	7,018	2,665	41.0%	6,500
	YoY	-90.2%	-48.2%	-18.3%	161.5%	2,607.0%	237.5%	101.6%	-50.4%		20.9%
	Operating profit margin	0.5%	3.9%	5.9%	6.6%	10.1%	10.5%	10.1%	2.8%		7.2%
Pre-tax profit		36	1,415	3,432	5,618	2,469	5,077	7,456	3,414
	YoY	-95.1%	-45.5%	-18.0%	168.2%	6,758.3%	258.8%	117.2%	-39.2%
	Recurring profit margin	0.2%	3.8%	5.9%	6.9%	10.7%	11.0%	10.7%	3.6%
Profit attributable to owners of the parent		9	1,028	2,511	3,943	1,934	3,798	5,523	1,211	26.9%	4,500
	YoY	-98.7%	-50.2%	-20.7%	478.2%	21,388.9%	269.5%	120.0%	-69.3%		14.1%
	Profit margin	0.1%	2.8%	4.3%	4.8%	8.4%	8.2%	7.9%	1.3%		5.0%
Quarterly		FY03/21				FY03/22
(JPYmn)		Q1	Q2	Q3	Q4	Q1	Q2	Q3	Q4
Revenue		17,399	19,717	21,503	22,752	23,016	23,128	23,502	24,098
	YoY	-25.1%	-14.3%	-4.6%	5.9%	32.3%	17.3%	9.3%	5.9%
Gross profit		4,969	6,053	6,818	7,011	7,387	7,306	7,039	5,930
	YoY	-27.3%	-14.3%	2.0%	8.2%	48.7%	20.7%	3.2%	-15.4%
	Gross profit margin	28.6%	30.7%	31.7%	30.8%	32.1%	31.6%	30.0%	24.6%
SG&A expenses		4,884	4,812	4,918	5,298	5,221	5,096	5,124	6,341
	YoY	-12.3%	-10.8%	-7.5%	-4.2%	6.9%	5.9%	4.2%	19.7%
	SG&A ratio	28.1%	24.4%	22.9%	23.3%	22.7%	22.0%	21.8%	26.3%
Core operating profit		84	1,241	1,900	1,713	2,166	2,210	1,915	-411
	YoY	-93.4%	-25.6%	38.8%	80.7%	2,478.6%	78.1%	0.8%	-
	Core operating profit margin	0.5%	6.3%	8.8%	7.5%	9.4%	9.6%	8.1%	-
Operating profit		86	1,350	2,045	1,896	2,328	2,519	2,171	-4,353
	YoY	-90.2%	-28.7%	37.2%	-	2,607.0%	86.6%	6.2%	-
	Operating profit margin	0.5%	6.8%	9.5%	8.3%	10.1%	10.9%	9.2%	-
Pre-tax profit		36	1,379	2,017	2,186	2,469	2,608	2,379	-4,042
	YoY	-95.1%	-25.9%	27.1%	-	6,758.3%	89.1%	17.9%	-
	Pre-tax profit margin	0.2%	7.0%	9.4%	9.6%	10.7%	11.3%	10.1%	-
Profit attributable to owners of the parent		9	1,019	1,483	1,432	1,934	1,864	1,725	-4,312
	YoY	-98.7%	-26.4%	34.9%	-	21,388.9%	82.9%	16.3%	-
	Profit margin	0.1%	5.2%	6.9%	6.3%	8.4%	8.1%	7.3%	-17.9%

Source: Shared Research based on company data

Cumulative			FY03/21				FY03/22
(JPYmn)			Q1	Q1–Q2	Q1–Q3	Q1–Q4	Q1	Q1–Q2	Q1–Q3	Q1–Q4
Revenue from external customers			17,399	37,116	58,619	81,371	23,016	46,144	69,646	93,744
	YoY		-25.1%	-19.7%	-14.8%	-9.8%	32.3%	24.3%	18.8%	15.2%
	Automotive Parts		5,984	14,484	24,657	34,974	10,021	19,793	30,590	41,829
		YoY	-40.2%	-27.4%	-16.9%	-10.1%	67.5%	36.7%	24.1%	19.6%
	Industrial Products		7,628	15,157	22,234	30,154	8,397	17,143	25,171	33,276
		YoY	-11.7%	-10.8%	-11.2%	-7.8%	10.1%	13.1%	13.2%	10.4%
	Advanced Elastomer Products		2,798	5,479	8,496	11,855	3,468	7,015	10,491	13,956
		YoY	-19.6%	-21.9%	-18.9%	-13.2%	23.9%	28.0%	23.5%	17.7%
	Other Business		988	1,995	3,230	4,386	1,129	2,191	3,392	4,682
		YoY	-9.9%	-12.5%	-9.9%	-11.8%	14.3%	9.8%	5.0%	6.7%
Revenue			17,399	37,116	58,619	81,371	23,016	46,144	69,646	93,744
	YoY		-25.1%	-19.7%	-14.8%	-9.8%	32.3%	24.3%	18.8%	15.2%
	Automotive Parts		5,984	14,484	24,658	34,975	10,021	19,793	30,590	41,829
		YoY	-40.3%	-27.5%	-17.0%	-10.2%	67.5%	36.7%	24.1%	19.6%
	Industrial Products		7,659	15,203	22,301	30,232	8,415	17,163	25,195	33,301
		YoY	-11.5%	-10.6%	-11.0%	-7.7%	9.9%	12.9%	13.0%	10.2%
	Advanced Elastomer Products		2,800	5,485	8,514	11,883	3,483	7,042	10,523	13,998
		YoY	-19.6%	-21.9%	-18.9%	-13.2%	24.4%	28.4%	23.6%	17.8%
	Other Business		1,198	2,481	3,945	5,368	1,337	2,581	3,917	5,554
		YoY	-7.1%	-3.5%	-1.4%	-3.7%	11.6%	4.0%	-0.7%	3.5%
	Adjustments		-244	-538	-800	-1,087	-242	-436	-581	-939
Core operating profit			84	1,325	3,225	4,938	2,166	4,376	6,291	5,880
	YoY		-93.4%	-54.9%	-25.1%	-6.0%	2,478.6%	230.3%	95.1%	19.1%
	Core operating profit margin		0.5%	3.6%	5.5%	6.1%	9.4%	9.5%	9.0%	6.3%
	Automotive Parts		-434	198	1,287	2,386	901	1,667	2,429	2,741
		YoY	-	-82.5%	-18.3%	12.1%	-	741.9%	88.7%	14.9%
		Core operating profit margin	-7.3%	1.4%	5.2%	6.8%	9.0%	8.4%	7.9%	6.6%
	Industrial Products		548	1,081	1,621	2,238	856	1,954	2,738	2,688
		YoY	3.4%	-13.7%	-6.8%	2.0%	56.2%	80.8%	68.9%	20.1%
		Core operating profit margin	7.2%	7.1%	7.3%	7.4%	10.2%	11.4%	10.9%	8.1%
	Advanced Elastomer Products		-186	-359	-308	-129	250	413	536	280
		YoY	-	-	-	-	-	-	-	-
		Core operating profit margin	-6.6%	-6.6%	-3.6%	-1.1%	7.2%	5.9%	5.1%	2.0%
	Other Business		35	143	282	339	84	147	280	304
		YoY	-73.5%	-37.0%	-40.4%	-43.0%	140.0%	2.8%	-0.7%	-10.3%
		Core operating profit margin	3.5%	7.2%	8.7%	7.7%	7.4%	6.7%	8.3%	6.5%
	Adjustments		121	261	342	103	73	192	305	-134
Quarterly			FY03/21				FY03/22
(JPYmn)			Q1	Q2	Q3	Q4	Q1	Q2	Q3	Q4
Revenue from external customers			17,399	19,717	21,503	22,752	23,016	23,128	23,502	24,098
	YoY		-25.1%	-14.3%	-4.6%	5.9%	32.3%	17.3%	9.3%	5.9%
	Automotive Parts		5,984	8,500	10,173	10,317	10,021	9,772	10,797	11,239
		YoY	-40.2%	-14.5%	4.6%	11.8%	67.5%	15.0%	6.1%	8.9%
	Industrial Products		7,628	7,529	7,077	7,920	8,397	8,746	8,028	8,105
		YoY	-11.7%	-9.8%	-12.0%	3.1%	10.1%	16.2%	13.4%	2.3%
	Advanced Elastomer Products		2,798	2,681	3,017	3,359	3,468	3,547	3,476	3,465
		YoY	-19.6%	-24.1%	-13.0%	5.5%	23.9%	32.3%	15.2%	3.2%
	Other Business		988	1,007	1,235	1,156	1,129	1,062	1,201	1,290
		YoY	-9.9%	-14.8%	-5.3%	-16.8%	14.3%	5.5%	-2.8%	11.6%
Revenue			17,399	19,717	21,503	22,752	23,016	23,128	23,502	24,098
	YoY		-25.1%	-14.3%	-4.6%	5.9%	32.3%	17.3%	9.3%	5.9%
	Automotive Parts		5,984	8,500	10,174	10,317	10,021	9,772	10,797	11,239
		YoY	-40.3%	-14.6%	4.6%	11.5%	67.5%	15.0%	6.1%	8.9%
	Industrial Products		7,659	7,544	7,098	7,931	8,415	8,748	8,032	8,106
		YoY	-11.5%	-9.8%	-11.9%	3.1%	9.9%	16.0%	13.2%	2.2%
	Advanced Elastomer Products		2,800	2,685	3,029	3,369	3,483	3,559	3,481	3,475
		YoY	-19.6%	-24.2%	-12.7%	5.6%	24.4%	32.6%	14.9%	3.1%
	Other Business		1,198	1,283	1,464	1,423	1,337	1,244	1,336	1,637
		YoY	-7.1%	0.2%	2.4%	-9.7%	11.6%	-3.0%	-8.7%	15.0%
	Adjustments		-244	-294	-262	-287	-242	-194	-145	-358
Core operating profit			84	1,241	1,900	1,713	2,166	2,210	1,915	-411
	YoY		-93.4%	-25.6%	38.8%	80.7%	2,478.6%	78.1%	0.8%	-
	Core operating profit margin		0.5%	6.3%	8.8%	7.5%	9.4%	9.6%	8.1%	-1.7%
	Automotive Parts		-434	632	1,089	1,099	901	766	762	312
		YoY	-	6.9%	144.7%	98.4%	-	21.2%	-30.0%	-71.6%
		Core operating profit margin	-7.3%	7.4%	10.7%	10.7%	9.0%	7.8%	7.1%	2.8%
	Industrial Products		548	533	540	617	856	1,098	784	-50
		YoY	3.4%	-26.2%	10.7%	35.6%	56.2%	106.0%	45.2%	-
		Core operating profit margin	7.2%	7.1%	7.6%	7.8%	10.2%	12.6%	9.8%	-0.6%
	Advanced Elastomer Products		-186	-173	51	179	250	163	123	-256
		YoY	-	-	-59.8%	-	-	-	141.2%	-
		Core operating profit margin	-6.6%	-6.5%	1.7%	5.3%	7.2%	4.6%	3.5%	-7.4%
	Other Business		35	108	139	57	84	63	133	24
		YoY	-73.5%	13.7%	-43.5%	-53.3%	140.0%	-41.7%	-4.3%	-57.9%
		Core operating profit margin	3.5%	10.7%	11.3%	4.9%	7.4%	5.9%	11.1%	1.9%
	Adjustments		121	140	81	-239	73	119	113	-439

Source: Shared Research based on company data

Overseas revenue			FY03/21				FY03/22
Cumulative (JPYmn)			Q1	Q1–Q2	Q1–Q3	Q1–Q4	Q1	Q1–Q2	Q1–Q3	Q1–Q4
Consolidated revenue			17,399	37,116	58,619	81,371	23,016	46,144	69,646	93,744
	YoY		-25.1%	-19.7%	-14.8%	-9.8%	32.3%	24.3%	18.8%	15.2%
Overseas revenue			7,432	17,164	28,031	39,236	11,994	23,516	35,783	48,671
	YoY		-31.2%	-19.8%	-11.8%	-5.4%	61.4%	37.0%	27.7%	24.0%
	% of total		42.7%	46.2%	47.8%	48.2%	52.1%	51.0%	51.4%	51.9%
	Asia		3,621	8,950	15,252	22,014	6,479	12,867	19,873	27,398
		YoY	-40.8%	-26.0%	-15.5%	-7.8%	78.9%	43.8%	30.3%	24.5%
		% of total	20.8%	24.1%	26.0%	27.1%	28.1%	27.9%	28.5%	29.2%
	China		1,979	4,079	6,316	8,281	2,752	5,165	7,620	9,988
		YoY	-6.7%	-4.0%	-0.6%	7.8%	39.1%	26.6%	20.6%	20.6%
		% of total	11.4%	11.0%	10.8%	10.2%	12.0%	11.2%	10.9%	10.7%
	Europe, the US, all other regions		1,832	4,135	6,463	8,941	2,763	5,484	8,290	11,285
		YoY	-28.4%	-18.2%	-12.2%	-9.7%	50.8%	32.6%	28.3%	26.2%
		% of total	10.5%	11.1%	11.0%	11.0%	12.0%	11.9%	11.9%	12.0%
Overseas revenue			FY03/21				FY03/22
Quarterly (JPYmn)			Q1	Q2	Q3	Q4	Q1	Q2	Q3	Q4
Consolidated revenue			17,399	19,717	21,503	22,752	23,016	23,128	23,502	24,098
	YoY		-25.1%	-14.3%	-4.6%	5.9%	32.3%	17.3%	9.3%	5.9%
Overseas revenue			7,432	9,732	10,867	11,205	11,994	11,522	12,267	12,888
	YoY		-31.2%	-8.3%	4.9%	15.7%	61.4%	18.4%	12.9%	15.0%
	% of total		42.7%	49.4%	50.5%	49.2%	52.1%	49.8%	52.2%	53.5%
	Asia		3,621	5,329	6,302	6,762	6,479	6,388	7,006	7,525
		YoY	-40.8%	-10.9%	5.7%	16.2%	78.9%	19.9%	11.2%	11.3%
		% of total	20.8%	27.0%	29.3%	29.7%	28.1%	27.6%	29.8%	31.2%
	China		1,979	2,100	2,237	1,965	2,752	2,413	2,455	2,368
		YoY	-6.7%	-1.3%	6.4%	47.9%	39.1%	14.9%	9.7%	20.5%
		% of total	11.4%	10.7%	10.4%	8.6%	12.0%	10.4%	10.4%	9.8%
	Europe, the US, all other regions		1,832	2,303	2,328	2,478	2,763	2,721	2,806	2,995
		YoY	-28.4%	-7.8%	1.3%	-2.4%	50.8%	18.2%	20.5%	20.9%
		% of total	10.5%	11.7%	10.8%	10.9%	12.0%	11.8%	11.9%	12.4%

Source: Shared Research based on company data

FY03/22 results (out May 12, 2022)

Summary

The company reported the following results for FY03/22.

Revenue: JPY93.7bn (+15.2% YoY; previous forecast of JPY90.0bn)
Core operating profit: JPY5.9bn (+19.1% YoY; JPY6.0bn)

Core operating profit margin: 6.3% (+0.2pp YoY; 6.7%)

Operating profit: JPY2.7bn (-50.4% YoY; JPY6.5bn)
Pre-tax profit: JPY3.4bn (-39.2% YoY; N.A.)
Profit attributable to owners of the parent: JPY1.2bn (-69.3% YoY; JPY4.5bn)

EPS was JPY26.9. The company plans to pay a year-end dividend of JPY24.0 per share, resulting in annual dividends of JPY40.0bn per share (JPY26.0 per share for FY03/21). This would result in a payout ratio of 148.6% (30.0% in FY03/21).

Revenue rose in the three main segments (Automotive Parts, Industrial Products, and Advanced Elastomer Products), outpacing the company’s forecast for the year and growing 15.2% YoY. Revenue was JPY93.7bn, the second-highest level since transitioning to IFRS-based disclosure in FY03/19 (retroactive application for FY03/18).

Core operating profit recovered, growing 19.1% YoY as a result of higher revenue and cost cutting, and settling generally in line with company expectations. The core operating profit margin rose 0.2pp YoY, to 6.3%. Core operating profit was affected by one-time operating expenses of JPY1.3bn recorded in Q4 (January–March 2022), as the company revised its bonus system. Effectively, therefore, Shared Research understands that core operating profit reached the highest level since the transition to IFRS reporting, outpacing the previous high of JPY6.7bn (FY03/18). The company had factored the spike in operating expenses into its forecast.

Operating profit fell 50.4% YoY. This decline was attributable to the revisions to the bonus system described above (a temporary jump in operating expenses), as well as impairment losses (goodwill, US business) of JPY4.3bn recorded in Q4.

Q4 (three months, January–March 2022)

The company reported the following results for Q4 FY03/22 (three months from January to March 2022).

Revenue: JPY24.1bn (+5.9% YoY)
Core operating loss: JPY411mn (profit of JPY1.7bn in Q4 FY03/21)

Core operating profit margin: N.A.

Operating loss: JPY4.4bn (profit of JPY1.9bn Q4 FY03/21)
Loss attributable to owners of the parent: JPY4.3bn (profit of JPY1.4bn in Q4 FY03/21)

In Q4 (three months), revenue rose YoY for the fifth consecutive quarter, while core operating profit fell YoY (to a loss) for the first time in nine quarters. The main reason for the core operating loss was a change in the bonus system, which cause the company to book one-time operating expenses of JPY1.3bn in Q4 (January–March 2022). The company also recorded impairment losses (goodwill, US business) of JPY4.3bn.

Note: Shared Research plans to update this report following an earnings briefing and interviews with the company.

FY03/23 company forecast (out May 12, 2022)

		FY03/21			FY03/22			FY03/23
(JPYmn)		1H	2H	Full-year	1H	2H	Full-year	1H Est.	2H Est.	FY Est.
Revenue		37,116	44,255	81,371	46,144	47,600	93,744			95,000
	YoY	-19.7%	0.5%	-9.8%	24.3%	7.6%	15.2%			1.3%
Gross profit		11,022	13,829	24,851	14,693	12,969	27,662			-
	YoY	-20.7%	5.1%	-8.2%	33.3%	-6.2%	11.3%			-
	Gross profit margin	29.7%	31.2%	30.5%	31.8%	27.2%	29.5%			-
SG&A expenses		9,696	10,216	19,912	10,317	11,465	21,782			-
	YoY	-11.6%	-5.8%	-8.7%	6.4%	12.2%	9.4%			-
	SG&A ratio	26.1%	23.1%	24.5%	22.4%	24.1%	23.2%			-
Core operating profit		1,325	3,613	4,938	4,376	1,504	5,880			7,000
	YoY	-54.9%	55.9%	-6.0%	230.3%	-58.4%	19.1%			19.0%
	Core operating profit margin	3.6%	8.2%	6.1%	9.5%	3.2%	6.3%			7.4%
Operating profit		1,436	3,941	5,377	4,847	-2,182	2,665			7,500
	YoY	-48.2%	-	161.5%	237.5%	-	-50.4%			181.4%
	Operating profit margin	3.9%	8.9%	6.6%	10.5%	-4.6%	2.8%			7.9%
Pre-tax profit		1,415	4,203	5,618	5,077	-1,663	3,414			-
	YoY	-45.5%	-	168.2%	258.8%	-	-39.2%			-
	Pre-tax profit margin	3.8%	9.5%	6.9%	11.0%	-3.5%	3.6%			-
Profit attributable to owners of the parent		1,028	2,915	3,943	3,798	-2,587	1,211			5,000
	YoY	-50.2%	-	478.2%	269.5%	-	-69.3%			312.9%
	Profit margin	2.8%	6.6%	4.8%	8.2%	-5.4%	1.3%			5.3%
Exchange rate
USD				105.93			113.05			120.00
THB				3.41			3.45			3.60
CNY				15.65			17.65			18.80

Source: Shared Research based on company data

Orders received			FY03/13	FY03/14	FY03/15	FY03/16	FY03/17	FY03/18	FY03/19	FY03/20	FY03/21
(JPYmn)			J-GAAP	J-GAAP	J-GAAP	J-GAAP	J-GAAP	IFRS	IFRS	IFRS	IFRS
Orders received			88,651	95,896	98,304	81,771	83,291	92,118	92,748	89,502	83,508
	YoY		6.3%	8.2%	2.5%	-16.8%	1.9%	10.6%	0.7%	-3.5%	-6.7%
	Automotive Parts		-	-	-	32,490	33,855	40,283	41,048	38,945	35,633
		YoY	-	-	-	-	4.2%	19.0%	1.9%	-5.1%	-8.5%
	Industrial Products		-	-	-	31,519	31,992	33,673	34,222	31,899	31,117
		YoY	-	-	-	-	1.5%	5.3%	1.6%	-6.8%	-2.5%
	Advanced Elastomer Products		-	12,946	15,942	15,254	14,995	15,922	14,728	13,707	12,347
		YoY	-	-	23.1%	-4.3%	-1.7%	6.2%	-7.5%	-6.9%	-9.9%
	Belts		-	81,711	80,773	-	-	-	-	-	-
		YoY	-	-	-1.1%	-	-	-	-	-	-
	Power Transmission Belts		56,794	-	-	-	-	-	-	-	-
		YoY	12.2%	-	-	-	-	-	-	-	-
	Multimedia Parts		8,010	-	-	-	-	-	-	-	-
		YoY	6.3%	-	-	-	-	-	-	-	-
	Industrial Products		17,909	-	-	-	-	-	-	-	-
		YoY	-12.3%	-	-	-	-	-	-	-	-
	Chemical Products		4,719	-	-	-	-	-	-	-	-
		YoY	23.5%	-	-	-	-	-	-	-	-
	Other Business		1,217	1,239	1,589	2,508	2,448	2,240	2,748	4,950	4,410
		YoY	25.6%	1.8%	28.2%	57.8%	-2.4%	-8.5%	22.7%	80.1%	-10.9%

Source: Shared Research based on company data

Order backlog			FY03/13	FY03/14	FY03/15	FY03/16	FY03/17	FY03/18	FY03/19	FY03/20	FY03/21
(JPYmn)			J-GAAP	J-GAAP	J-GAAP	J-GAAP	J-GAAP	IFRS	IFRS	IFRS	IFRS
Order backlog			8,417	10,359	8,863	9,250	9,729	10,076	8,925	8,186	10,324
	YoY		18.4%	23.1%	-14.4%	4.4%	5.2%	3.6%	-11.4%	-8.3%	26.1%
	Automotive Parts		-	-	-	3,905	3,870	2,168	1,600	1,642	2,301
		YoY	-	-	-	-	-0.9%	-44.0%	-26.2%	2.6%	40.1%
	Industrial Products		-	-	-	3,742	4,457	6,353	5,870	5,186	6,149
		YoY	-	-	-	-	19.1%	42.5%	-7.6%	-11.7%	18.6%
	Advanced Elastomer Products		-	2,240	1,109	1,180	1,261	1,854	1,355	1,279	1,771
		YoY	-	-	-50.5%	6.4%	6.9%	47.0%	-26.9%	-5.6%	38.5%
	Belts		-	8,068	7,650	-	-	-	-	-	-
		YoY	-	-	-5.2%	-	-	-	-	-	-
	Power Transmission Belts		4,569	-	-	-	-	-	-	-	-
		YoY	17.1%	-	-	-	-	-	-	-	-
	Multimedia Parts		1,275	-	-	-	-	-	-	-	-
		YoY	16.2%	-	-	-	-	-	-	-	-
	Industrial Products		2,093	-	-	-	-	-	-	-	-
		YoY	17.7%	-	-	-	-	-	-	-	-
	Chemical Products		436	-	-	-	-	-	-	-	-
		YoY	71.0%	-	-	-	-	-	-	-	-
	Other Business		42	50	103	123	139	123	99	77	101
		YoY	-40.0%	19.0%	106.0%	19.4%	13.0%	-11.5%	-19.5%	-22.2%	31.2%

Source: Shared Research based on company data

Overview of company forecast

The company announced its full-year forecast for FY03/23, as follows.

Revenue: JPY95.0bn (+1.3% YoY)
Core operating profit: JPY7.0bn (+19.0% YoY)

Core operating profit margin: 7.4% (+1.1pp YoY)

Operating profit: JPY7.5bn (roughly 2.8x the FY03/22 level)
Profit attributable to owners of the parent: JPY5.0bn (roughly 4.1x the FY03/22 level)

Forecast EPS is JPY112.3. The company plans annual dividends of JPY44.0 per share (JPY40.0 per share in FY03/22), which would result in a payout ratio of 39.2% (148.6% in FY03/22).

The company expects to achieve the highest levels of revenue, core operating profit, and operating profit since moving to IFRS-based disclosure, and to maintain its record-high core operating profit margin. In FY03/22, operating profit and bottom-line profit (profit attributable to owners of the parent) were both negative as the result of impairment losses. Consequently, in FY03/23 the company expects a sharp rebound in growth rates for operating profit and bottom-line profit.

Note: Shared Research plans to update this report following interviews with the company.

Company forecasts versus results

Results vs. Initial Est.		FY03/14	FY03/15	FY03/16	FY03/17	FY03/18	FY03/19	FY03/20	FY03/21	FY03/22	FY03/23
(JPYmn)		J-GAAP	J-GAAP	J-GAAP	J-GAAP	J-GAAP	IFRS	IFRS	IFRS	IFRS	IFRS
Revenue	Initial Est.	92,000	95,000	100,000	94,000	91,000	94,000	-	-	90,000	95,000
	Act.	93,434	95,395	93,272	88,387	91,263	94,318	90,247	81,371	93,744
	Diff.	1.6%	0.4%	-6.7%	-6.0%	0.3%	0.3%	-	-	4.2%
Core operating profit	Initial Est.						6,500	-	-	6,000	7,000
	Act.						6,503	5,252	4,938	5,880
	Diff.						0.0%	-	-	-2.0%
Operating profit	Initial Est.	5,600	5,800	5,800	6,000	6,000		-	-	6,500	7,500
	Act.	5,517	4,797	5,960	5,896	6,336		2,056	5,377	2,665
	Diff.	-1.5%	-17.3%	2.8%	-1.7%	5.6%		-	-	-59.0%
Pre-tax profit (recurring profit)	Initial Est.	6,000	6,400	6,800	6,400	6,600	7,000	-	-	-
	Act.	6,103	5,730	6,363	6,571	6,598	7,166	2,095	5,618	3,414
	Diff.	1.7%	-10.5%	-6.4%	2.7%	-0.0%	2.4%	-	-	-
Profit (net income)	Initial Est.	4,000	4,300	4,500	4,500	4,900	5,000	-	-	4,500	5,000
	Act.	4,280	3,758	4,386	4,951	4,795	5,457	682	3,943	1,211
	Diff.	7.0%	-12.6%	-2.5%	10.0%	-2.1%	9.1%	-	-	-73.1%

Source: Shared Research based on company data
Note: Figures may differ from company data due to differences in rounding methods.
Note: The company did not disclose forecasts at the start of the year in FY03/20 and FY03/21.

Medium- to long-term management plan

		BF-1
MTP		FY03/14	FY03/15	FY03/16		FY03/17	FY03/18
(JPYmn)		J-GAAP	J-GAAP	J-GAAP		J-GAAP	J-GAAP
Revenue		93,434	95,395		93,272	88,387	91,263
	YoY	8.9%	2.1%		-2.2%	-5.2%	3.3%
Operating profit		5,517	4,797		5,960	5,896	6,336
	YoY	34.8%	-13.1%		24.2%	-1.1%	7.5%
	Operating profit margin	5.9%	5.0%		6.4%	6.7%	6.9%
ROE		9.4%	7.2%		7.9%	8.6%	8.1%

								BF-2
				MTP			FY03/18	FY03/19	FY03/20	FY03/21	FY03/22	FY03/23
				(JPYmn)			IFRS	IFRS	IFRS	IFRS	Est.	MTP
				Revenue			90,798	94,318	90,247	81,371	90,000	120,000
					YoY		-	3.9%	-4.3%	-9.8%	10.6%	33.3%
				Core operating profit			6,688	6,503	5,252	4,938	6,000	12,000
					YoY		-	-2.8%	-19.2%	-6.0%	21.5%	100.0%
					Core operating profit margin		7.4%	6.9%	5.8%	6.1%	6.7%	10.0%
				ROE			8.1%	8.2%	1.0%	5.9%	-	12.0%

Source: Shared Research based on company data
Note: The company has adopted IFRS accounting from FY03/19 (it released figures under IFRS and Japanese GAAP in FY03/18).

Overview of medium- to long-term management plan

The company embarked on its current medium- to long-term plan “Breakthroughs for the future” in FY03/14. It has completed the first stage of the plan (BF-1: FY03/14–FY03/18) in FY03/18, and entered the fourth year of the plan’s second stage (BF-2: FY03/19–FY03/23). In the BF-2 stage, the company aims to prioritize new business creation while focusing on core business expansion, enhancement and evolution in manufacturing, and work style innovation for both individuals and the organization. By FY03/23, it targets revenue of JPY120.0bn (JPY90.8bn in FY03/18), core operating profit of JPY12.0bn and (JPY6.7bn), and ROE of 12.0% (8.3%). It also looks to bring the revenue share for new businesses and products up to 30%.

Reflection on BF-1 stage

In May 2013, the company unveiled the new medium- to long-term plan “Breakthroughs for the future” that spans the period from FY03/14 to FY03/23. To realize its vision for the group in 10 years, it will concentrate on implementing the following three strategies.

Refine the core technologies and reliable quality of its rubber, elastomers, and resin products, which the company has developed since its founding

Provide notable value-added products across the world that contribute to environmental preservation, energy conservation, and higher functionality

Become a standout global supplier in the belt and functional products fields

The plan is divided into two five-year stages: BF-1 and BF-2. In the BF-1 stage, the company followed five guidelines, which are summarized below.

Evolution of global market strategy

Bando aspired to become the leader in belt products in Asia, which is a region of strategic importance for the company. To this end, it aimed to expand its production capacity at existing production bases (such as in Thailand and Indonesia), while concurrently ramping up production in bases in emerging markets (such as in India and Vietnam). It also worked to broaden its business area in China and the ASEAN markets, and focused on market development in regions alongside the Mekong river.

In Japan, the company aimed to develop high-performance products in line with market needs, strengthen its brand recognition in the value chain provided by its sales network that is rooted in close ties with customers, and expand peripheral businesses with a focus on the aforementioned core products. As an improvement measure to achieve this, Bando strengthened originality in its strategic products, including those under development, and made modular proposals that combined even higher performance for core products with peripheral products to meet the needs of its customers. In core products, the company indicated it would provide stability and reliably to customers by expanding its value chain with design, installation, monitoring, and inspection functions.

Evolve products

The company aimed to promote the development of products with optimal market specifications tailored to the needs of its customers in various global regions, continually launch products notable for their reduced environmental load, high efficiency, compact design, and multifunctionality, and cultivate new markets accordingly.

Evolve manufacturing

To increase customer trust, the company strived to further reduce the rate of defective products across all the production lines of its plants, and achieve high cost-competitiveness. To this end, it worked to reinforce its Bando Production System (BPS) activities, and replaced some of its existing production lines with new ones.

Create new businesses

The company aimed to enhance core technologies that compound, disperse, and combine rubber, elastomers, resin, and other materials to facilitate their applications in targeted strategic markets (such as optoelectronics, energy, and robotics). In addition, it looked to create new products through original technologies formed by fusing these core technologies with new ones and cultivate new businesses that could serve as next-generation drivers.

Evolve quality of management

The company worked to strengthen its business portfolio management centered on strategic investments in growth products and the elimination of loss-making products and businesses. It aimed to step up management oversight at the consolidated level, strengthen the training of staff, and reinforce its financial position (measures to eliminate net interest-bearing debt and deal with forex and interest rate fluctuations).

Numerical targets for the BF-1 stage and outcomes (financial targets based on Japanese GAAP)

During the five years of the BF-1 stage, the company budgeted JPY25.0bn in capital investment and JPY5.0bn in R&D investment for new products, and aimed to achieve the following numerical targets in the final year (FY03/18).

Revenue: JPY100.0bn
Operating profit: JPY10.0bn (operating profit margin of 10%)
Ratio of new products: 30%
ROA: 6%

The FY03/18 results were as follows.

Revenue: JPY91.3bn (JPY85.8bn in FY03/13)
Operating profit: JPY6.3bn (JPY4.1bn in FY03/13)
Ratio of new products: 12.8%
ROA: 7.0% (5.9% in FY03/13)

The FY03/18 results exceeded the FY03/13 figures, but finished below the BF-1 targets. As reasons for the shortfall, the company cited lower-than-expected sales in China and South Korea, delays in the development and market launches of new products, and an increase in SG&A expenses caused by higher R&D and other expenses related to IT investment and new businesses. Shared Research understands that earnings during the five-year period were affected by major changes in external factors in the China business (both on the production and sales fronts), the stock market turbulence in China in 2015, and trade friction between the US and China after the Trump administration assumed office. However, Bando also made tangible progress in many areas during the period, reducing costs by installing new production lines at its main plants and launching new products in areas that it had previously not explored (such as medical equipment and electronic products).

Based on the outcomes of the BF-1 stage and the outstanding challenges, the company announced a BF-2 stage that spanned the five years from FY03/19 to FY03/23.

Four guidelines of BF-2 stage

The company will pursue the following four guidelines as its basic strategy to achieve its vision for the BF-2 stage.

Guideline 1: New business creation

The company will work to prioritize the allocation of management resources to activities that create new businesses, and reshuffle its existing business portfolio accordingly. To this end, it has defined the following markets, strategic areas, and key products as its primary targets.

Display field: Bando expects demand for various types of display to expand in tandem with growing uptake in vehicles.

Power electronics field: This field encompasses technologies related to power conversion and control. The company will target thermal management technologies (such as heat and temperature management), which are in high demand.

Medical, welfare, and nursing care markets: The company expects societal aging to drive further growth in these markets.

Bando will also aim to expedite the commercialization of promising products that have already enjoyed some success. Specifically, it will work to strengthen market adoption of product lines developed and launched into the market in the BF-1 stage. To that end, the company will strive to step up initiatives aimed at facilitating expanded use of these products among overseas customers; complete quality designs and refine its production and manufacturing technologies; and pursue commercialization of upgraded products underpinned by fresh concepts.

Guideline 2: Core business expansion

The company plans to strengthen its operations in strategic industries in select regions. It aims to improve customer convenience by providing products with high value. In this way, it looks to capture top market shares in its targeted strategic markets. To gain further customer recognition, it will pursue the following three activities.

Market map activities

The company aims to participate in the strategic markets it has identified as a leading company, and stay ahead of its competitors. These activities are most essential in Bando’s view.

Technical map activities

The company will continue to develop products differentiated by their energy-saving properties and reduced environmental load, while enhancing their functions in line with market needs.

Customer convenience improvement activities

The company will increase its brand recognition and expand its value chain by proposing products and services to customers that improve their convenience.

Guideline 3: Enhancement and evolution in manufacturing

The company aims to grow its core businesses on a global scale, and evolve its manufacturing technology and systems to enhance profitability. It looks to keep its consolidated cost of revenue ratio below 70% and views this numerical target as most important in terms of improving its earnings power. Concrete measures it will implement toward this end are: developing innovative manufacturing methods; promoting the use of the Internet of Things (IoT) and artificial intelligence (AI) at its plants; and pursuing reductions in the manufacturing costs via optimization. The company will develop innovative production methods for its core power transmission belts in Japan, and roll these out horizontally at its overseas production bases along with automated production lines. It will strive to reduce work hours through IoT solutions and expand the use of AI robots. It will streamline its products and material lineups, reduce materials costs, and optimize its global distribution.

Guideline 4: Work style innovation for both individuals and the organization

The company will seek to promote autonomous and creative work styles by providing work environments and systems, and by training staff and fostering awareness. It believes these work style reforms are necessary to underpin the successful execution of guidelines 1–3. At the same time, it will work to keep its SG&A ratio below 20%, while also strengthening its management base.

Numerical targets for BF-2 stage (financial targets presented on IFRS basis)

Through the successful implementation of guidelines 1–4, the company aims to achieve the following targets in FY03/23, the final year of the BF-2 stage.

Revenue: JPY120.0bn (JPY90.8bn in FY03/18)
Core operating profit: JPY12.0bn (JPY6.7bn in FY03/18)
Core operating profit margin: 10% (7.4% in FY03/18)
ROE: 12% (8.3% in FY03/18)
Revenue share for new businesses and products: 30% or above (particularly, revenue share for new businesses of 10% or above)

To achieve these targets, it budgets JPY30.0bn in capital investment (compared with JPY23.6bn in the BF-1 stage) and JPY25.0bn in R&D expenses (JPY20.1bn) over the five years of the B-2 stage. It forecasts depreciation of JPY25.0bn (JPY21.2bn). It plans to increase revenue by about JPY29.2bn over the five-year period, breaking down into increases of JPY17.2bn from existing businesses and JPY12.0bn from new businesses.

Changes in revenue composition

In accordance with its plan, the company looks to increase revenue from JPY41.6bn (FY03/18, same below) to roughly JPY44.0bn (FY03/23, same below) in the Automotive Parts segment (implying a drop in revenue share from 45.8% to roughly 36.6%), from JPY31.8bn to about JPY44.0bn in the Industrial Products segment (implying a rise in revenue share from 35.1% to around 36.6%), from JPY15.1bn to roughly JPY23.0bn in the Advanced Elastomer Products segment (implying a rise in revenue share from 16.7% to about 19.2%), and from JPY2.2bn to roughly JPY9.0bn in the Other Business segment (implying a rise in revenue share from 2.5% to 7.5%). In other words, these changes will alter Bando’s existing revenue composition. (Note that the data above in part reflects estimates by Shared Research.)

Progress to date

Since Bando formulated its BF-2 plans, the external environment surrounding its businesses has taken a sharp turn for the worse. It remains unclear how the trade friction between the US and China will evolve under the Biden administration, which came into power in 2021. Bando has been affected by the COVID-19 pandemic, which is a factor the company had no knowledge of when it drew up its plans. The impact of the pandemic intensified from January 2020, eroding revenue in existing businesses in FY03/20 and FY03/21. In Japan, revenue is gradually returning to pre-pandemic levels as a result of progress with vaccinations, but the pandemic has yet to be contained in Southeast Asia, which is one of the company’s earnings drivers. At present, Bando has left its numerical targets for FY03/23 unchanged, but attaining its revenue growth target for existing businesses (increase of JPY17.2bn from FY03/18) has become a challenge.

At the same time, the company has achieved steady progress in new businesses and new products. Such results are starting to appear particularly in the medical and healthcare equipment business, which is a focus area for Bando.

The medical and healthcare equipment business is mainly led by Aimedic MMT Co., Ltd., a wholly owned subsidiary acquired by the company in May 2019. Aimedic MMT excels in selling orthopedic medical devices, an area in which it has built high brand recognition. It is currently working on several development projects that fuse the core rubber, elastomer, and resin technologies of Bando. One of these projects involves expanding sales of the elastic strain sensor C-STRETCH that was commercialized during the BF-1 stage. C-STRETCH is a novel type of sensor developed by the company using elastic, conductive elastomer material. It allows detection of various strains through superior elasticity and flexibility, and is used to measure movements and biometric information. Bando aims to leverage synergies with Aimedic MMT to establish a medical and healthcare equipment business with C-STRETCH as a flagship product.

Meanwhile, the company is also making steady headway in the electronic products business, another pillar of its new businesses. It is starting to see effects from business growth for its optical clear adhesive Free Crystal for automotive applications, and from its precision polishing material TOPX for displays. In addition, Bando is focusing on expanding sales of its high thermal conductive sheet HEATEX.

Medium- to long-term strategy (Automotive Parts segment)

The first guideline of the BF-2 stage of Bando’s medium- to long-term plan is to create new businesses. The company therefore aims to prioritize the allocation of management resources to activities that create new businesses and reshuffle its existing business portfolio. Its focus on new business creation is mainly driven by a sense of urgency surrounding the decline in its mainstay Automotive Parts segment.

The function of automotive power transmission belts, whether used to drive accessories or camshafts, is to transmit the power of an engine to various parts or locations of the vehicle. However, the ongoing electrification of vehicles has given rise to electric vehicles (EVs) that do away with the classical engine and instead derive their power from a battery and motor. As a result, these vehicles no longer require power transmission belts. Even among hybrids, a category of vehicles with a growing market size that is essentially a stepping stone toward EVs, there are some full-hybrid models (vehicles equipped with a hybrid system that allows them to run on motor power alone for limited periods of time) such as the Toyota Prius that no longer use power transmission belts. The resulting decline in power transmission belts for new vehicles will inevitably also depress demand for belts for repairs in the future.

To overcome these challenges, the company is currently pursuing the following strategies.

Capture demand from mild hybrids

Not all automakers are capable of offering full hybrids such as the Toyota Prius. From a cost perspective or parts (particularly, battery) procurement standpoint, Bando expects demand for mild hybrid vehicles to expand during the transition period the industry needs to fully migrate toward EVs. Mild hybrids cannot run on motor power alone, and therefore require power transmission belts like vehicles with internal combustion engines. Shared Research understands that belts for mild hybrids need to deliver superior heat resistance and durability, as a result of which the company can sell them at a premium of 10% or more over existing belt products. Automakers such as Suzuki Motor, Mazda Motor, and Mitsubishi Motors all manufacture mild hybrids, and Shared Research understands these vehicles are likely to gain further traction not only in Japan but across the world. That said, Bando recognizes that mild hybrids can only serve as a transitory source of demand until all-electric vehicles become the standard, so it has no intention of making such vehicles a pillar of its operations.

Capture demand for new applications

The electrification of vehicles has started to drive demand for new types of power transmission belts. For example, such belts are now being considered for use in electric parking brakes, and already starting to be adopted in power steering and doors. These developments reflect a recognition of the properties of power transmission belts, particularly their high transmission efficiency and quiet operation. Bando expects demand for belts for new applications to further expand in the future.

Capture new demand for products other than belts

Among non-belt products, Bando concentrates on automotive functional films, and it is currently working to increase adoption and sales of its optical clear adhesive (OCA) film for automotive displays, and decorative films for interior materials. The company expects new demand for such products to emerge progressively as automakers seek to increase the visibility of the increasingly diverse information displayed on automotive displays and to enhance cabin comfort. In addition, among new demand sources stemming from the transition to EVs, Bando mainly concentrates on heat dissipation sheets. Vehicles in the future are expected to generate more heat due to increased usage of precision parts in tandem with advances in electrification, and this trend is likely to raise demand for thermal management solutions to prevent defects. With this in mind, the company is working to commercialize its high thermal conductive sheet HEATEX, which facilitates efficient thermal management.

Expand existing businesses with focus on repair market

Bando controls a sizeable share of the Japanese market for repair parts, but its global share in this market has lagged its domestic share, so the company sees significant room for future growth in its repair operations overseas. Aside from Japan, it focuses much of its attention on operations in China, the US, and India. Not all countries in the world are actively pursuing the electrification of vehicles, and many regions have also fallen behind with related initiatives. A prime example of this is the US, which is the world’s largest car market (second-largest market for new vehicle sales with roughly 17.5mn units sold per year, and largest market by car ownership, with 285.0mn vehicles owned). Bando has established a global supply structure with four strategic regions, and its bases in the US and Mexico make up one of these (only the base in the US has manufacturing capacity). However, its presence in this region remains small compared with Japan and other Asian nations. Although the company faces competition from powerful local rivals such as Gates Corporation and Dayco Products, Shared Research understands that Bando has considerable room to further leverage its existing bases.

While the general push for the electrification of vehicles, which includes the transition to EVs, has major implications, it is not the case that all vehicles will go all-electric by a certain date. Neither is it plausible that all vehicles currently in circulation (78.5mn in Japan, roughly 1.4bn worldwide) will be declared unusable by a certain date. Shared Research understands that Bando is ahead of competitors such as Mitsuboshi Belting in its efforts to prepare for future changes in the automotive landscape.

Medium- to long-term strategy (Industrial Products segment)

The Industrial Products segment is the second pillar of the company’s operations. Unlike the mainstay Automotive Parts segment, which is being affected by the inexorable rise of electrification in the automotive industry, the Industrial Products segment faces few pressing management challenges. However, Bando recognizes that similar challenges may emerge in the prevailing environment that calls for reductions in power generation from fossil fuels (carbon-neutral society) and in the environmental load. To prepare for such potential changes, the company is pursuing a medium- to long-term strategy in the segment.

Achieving success in belts for large agricultural machinery amid focus on priority industries

In the Industrial Products segment, Bando supplies products to a broad range of customers in diverse industries. However, it views robotics, semiconductor production equipment, machine tools, agricultural machinery, and financial terminals as strategic targets in focus industries. While it is making steady headway in each of these fields, it has always excelled in products for agricultural machinery. Shared Research understands that the profit margins generated on belts for agricultural machinery exceed the segment profit margin (core operating profit margin of 7.4% in FY03/21), and that this is attributable to the company’s high share of supply to Japanese original equipment manufacturers, the high belt quantities needed for agricultural machinery (multiple belts required per piece of machinery), and Bando’s strength in selling own-brand repair products.

Climate change has led to global issues such as food shortages that are apparent in the recent surge in food prices. The company therefore believes that demand for agriculture will expand further going forward. At the same time, farming populations (i.e., the number of workers that engage in agriculture) are shrinking, particularly in developed nations, so the dependence on agricultural machinery is bound to increase. Against this backdrop, research firm Global Information expects the global agricultural machinery market to expand at a CAGR of 4.2% from USD92.2bn in 2020 to USD113.0bn in 2025.

Bando believes the growth in demand for agricultural machinery belts will be driven by large machinery, and it concentrates on expanding belts for large machinery used to cultivate crops, which represent a larger market than their counterparts to cultivate rice. It has already finished preparations for production lines (Phase 1), and started supply to major local manufacturers in overseas growth markets. Bando is also working to expand repair sales for large agricultural machinery. It has announced growing sales of belts for large agricultural machinery in China, both to original equipment manufacturers as well as in the repair market. The company expects demand for large agricultural machinery to grow particularly in the US and China as both countries have large populations and land areas, and it therefore targets these markets under its medium to long-term strategy.

Launch and expand sales of new light-duty conveyor belts that take advantage of materials processing technology

Light-duty conveyor belts are another area the company is focused on. Bando is one of just a handful of large manufacturers of conveyor belts in Japan. However, in the previously thriving market for large conveyor belts, demand from the steel and other industries has plateaued. For this reason, the company has added high-margin sealed conveyor products to its lineup, and it is working to move from a product sales-centric business model to one that expands services. In addition to such measures, Bando is focusing on light-duty conveyor belts, a market poised for expansion. It has launched and is stepping up sales of its “Mr.” series of light-duty conveyor belts (Mr. Spike in 2019 and Mr. Non-Stick in 2020). It is also releasing new belts that take further advantage of its materials processing technology to enhance properties such as grip, durability, and adhesive support.

Shared Research understands that the medium- to long-term strategy for the Industrial Products segment not only entails driving growth for the segment but also offsetting the decline in sales in the Automotive Parts segment, which is currently in a transition phase as cars become increasingly electrified.

Business

Business model overview

Bando is Japan’s largest manufacturer of power transmission and conveyor belts. In FY03/21, it reported revenue of JPY81.4bn and core operating profit of JPY4.9bn. The mainstay Automotive Parts segment posted revenue of JPY35.0bn and core operating profit of JPY2.4bn (accounting for 43.0% and 48.3%, respectively, of total revenue and total core operating profit), the Industrial Products segment revenue of JPY30.2bn and core operating profit of JPY2.2bn (37.1%, 45.3%), the Advanced Elastomer Products segment revenue of JPY11.9bn and a core operating loss of JPY129mn (14.6%, N/A), and the Other Business segment revenue of JPY4.4bn and core operating profit of JPY339mn (5.4%, 6.9%). Shared Research estimates belt-related revenue came to JPY65.0–68.0bn, 20–25% above the JPY54.4bn reported by Mitsuboshi Belting (TSE1: 5192), the second-largest belt supplier in Japan.

Types of power transmission belts and their functions

The power transmission belts manufactured and sold by Bando are made of rubber or urethane, and their function is to transmit power of an engine or motor. They are mainly used in automobiles and industrial machinery.

Bulk of the automotive power transmission belts are accessory drive belts (V-belts and V-ribbed belts)

The lion’s share of the power transmission belts used in automobiles are accessory drive belts (fan belts), which drive automotive accessories^* by running over pulleys. Synchronous belts, which rotate camshafts^**, are another type of automotive belts.

*Accessories: A general term for peripheral devices that are necessary to drive the main engine. Examples of automotive accessories are alternators, power-steering pumps, and water pumps.

**Camshafts: Rods that are responsible for opening and closing the engine valves at the appropriate times.

Accessory drive belts are broadly divided into V-belts and V-ribbed belts. Flat belts are another type of accessory drive belts, but their use within the automotive industry is currently limited to some diesel engine vehicles. V-belts first appeared on the scene in the early 1970s, followed by V-ribbed belts in the late 1980s. Since then, belts have continued to evolve through a diversification of the rib shape designed to grip the pulley. At present, V-belts are predominantly employed in diesel engines and V-ribbed belts in gasoline engines. Another difference in application is that V-belts are used in trucks (commercial vehicles), while V-ribbed belts are used in passenger cars. V-ribbed belts for passenger cars have three or four ribs for light vehicles, six ribs for vehicles with 2-liter engines, seven ribs for vehicles with 3-liter engines, and eight or more ribs for vehicles with 4-liter-plus engines.

Cross sections of V-belt (left) and V-ribbed belt (right)

Source: Images provided by the company
Note: Core wires made of polyethylene terephthalate (PET) or aramid fiber are embedded into adhesive rubber layers to increase strength and durability. The V-ribbed belt on the right has three ribs (three contact surfaces at the bottom). The V-belt on the left has one contact surface.
Note: For an illustration of a belt fitted to an engine, refer to the image “Accessory drive belt (V-ribbed belt) inside an engine” in the “Basic business model” section.

Belts have a physical lifespan

The materials used in belts deteriorate over time and therefore have a physical lifespan. V-ribbed belts last longer than V-belts. Modern passenger cars in principle use one accessory drive belt per vehicle.

Automotive synchronous belts at one time were replaced with chains

Synchronous belts are fitted in locations that require resistance to heat, oil, and abrasion, as well as mechanical (tensile) strength, and would therefore struggle to meet the desired quality requirements if they were made of the same materials as V-belts and V-ribbed belts (chloroprene rubber [CR] and ethylene propylene diene monomer [EPDM]). For this reason, they are made of hydrogenated nitrile rubber (HNBR), which ensures a longer lifespan but at a higher cost (about 5x the cost of CR). At one point in the past, synchronous belts were replaced with chains to meet increased heat resistance requirements, and they nearly fell into disuse. Moving into the 2010s, however, automakers revisited this approach amid rising demand for fuel efficiency and thanks to the improved durability and overall performance of synchronous belts, which offer minimal friction loss. As a result, synchronous belts enjoyed a revival, becoming widely used in new fuel-efficient gasoline vehicles with small-displacement engines and diesel vehicles. While Bando manufactures and sells high-strength synchronous belts that drive camshafts, its core products are accessory drive belts (V-belts and V-ribbed belts).

Meanwhile, industrial machinery uses various types of power transmission belts that differ by application, ranging from V-belts to flat belts and toothed belts. It is not uncommon for one piece of industrial machinery to require multiple power transmission belts.

Basic business model

Capture replacement demand for belts (consumables) by providing repair parts

Automotive belts (including for motorcycles), industrial machinery belts, and related peripheral equipment represent Bando’s core operations, accounting for roughly 80% of its revenue. Under its present business model, the company basically manufactures and supplies power transmission belts for new vehicles and industrial machinery, and subsequently captures replacement demand by providing repair parts. Power transmission belts are made of rubber and urethane (two raw materials derived from naphtha), and they are both functional and consumable products. They inevitably deteriorate physically depending on the usage amount and time, and thus generate reliable replacement demand. In addition to wear sustained in the normal course of operation, defects, damage from accidents, and aging are all factors that produce a certain amount of replacement demand.

Establish rapid delivery system by relying on existing network

Timely response to replacement demand, when and where it arises, requires a broad supply network. In Japan, Bando not only supplies products through its own sales network, but also through a nationwide network of specialist trading companies and agents. It has established a supply structure that allows it to rapidly respond to requests, which is the top priority for repair parts needed for replacements. Some of its own-brand products in the Automotive Parts segment and the Industrial Products segment, for which the company has bargaining power, have become established products in their respective industries.

Increase in parts for new vehicles generates subsequent demand for repair parts

In addition, the parts for new vehicles or industrial machinery supplied by Bando subsequently become a major driver of repair part sales. The company takes advantage of its materials processing technology accumulated as a chemicals manufacturer to push bundled system sales that include peripheral parts such as pulleys and tensioners. In Japan, the market for power transmission belts is valued at roughly JPY70.0bn per year. It is a niche market with little prospect for sharp growth. It attracts few new entrants even in the area of product supply for new vehicles. Bando produces and sells power transmission belts while taking advantage of its strengths as the leader in this niche market.

Accessory drive belt (V-ribbed belt) inside an engine

Source: Image provided by the company
Note: Pulleys are disc-shaped objects around which belts are wrapped.

Core technologies underpinning business model

Processing technologies for materials such as rubber and elastomers are core technologies

Bando’s basic business model is underpinned by five core technologies it has developed and accumulated since its founding in 1906: rubber materials and processing technology, resin materials and processing technology, urethane materials and processing technology, adhesive technology, and nanoparticle creation technology. The fifth technology in this list is the latest addition to the company’s core technologies. It is being cultivated in connection with new businesses under the medium- to long-term management plan. In other words, the first four core technologies play an important role in the company’s existing belt businesses.

The core accessory drive belts (mainly V-belts and V-ribbed belts) supplied by the company must comply with a broad range of requirements specified by its customers (automakers and machinery manufacturers). Their main function is to transmit power, but they must also deliver high transmission efficiency, quiet operation (low noise), durability (reduced susceptibility to damage or scratching), heat resistance, lightweight design to support fuel efficiency, and cost-effectiveness to undercut overseas rivals. These requirements are tightened every time a manufacturer upgrades the performance of its vehicles or machinery.

Proprietary materials processing technology creates barriers to entry

Bando’s technologies to compound, disperse, and combine rubber, elastomers, and other materials are the core technologies that enable it to meet the diverse needs of its customers. The primary raw materials used to make belts are rubber and urethane but these are rarely used as a single material. Bando possesses technologies that compound or disperse these soft raw materials, or combine them with (glue them to) organic or inorganic materials. Key among these are core technologies such as rubber or elastomer compounding technologies, which are integrated in the company’s processing and production technologies. These compounding technologies are original technologies that cannot be easily emulated by new entrants. In this way, they create a significant barrier to entry.

A parts manufacturer with proprietary materials processing technology

Bando is Japan’s largest manufacturer of power transmission and conveyor belts. Its manufacturing activities are supported by production technologies and compounding, dispersion, and combining technologies for rubber, elastomers, and other materials. The latter categories are the reason the company name includes the word “chemical.” Power transmission belt production requires both the production technologies of a parts manufacturer and materials processing technologies. Accordingly, parts or materials manufacturers that merely possess one of these two sets of technologies cannot enter this industry. Bando has sufficient strengths in both categories.

Automotive Parts

Automotive Parts			FY03/16	FY03/17	FY03/18	FY03/19	FY03/20	FY03/21
(JPYmn)			J-GAAP	J-GAAP	IFRS	IFRS	IFRS	IFRS
	Production		44,606	43,223	41,170	40,841	37,235	33,160
	Orders received		32,490	33,855	40,283	41,048	38,945	35,633
	Order backlog		3,905	3,870	2,168	1,600	1,642	2,301
	Revenue		42,750	40,232	41,606	41,615	38,902	34,974
		YoY	N.A.	-5.9%	N.A.	0.0%	-6.5%	-10.1%
	Segment profit		3,323	2,937	3,401	3,182	2,129	2,386
		YoY	N.A.	-11.6%	N.A.	-6.4%	-33.1%	12.1%
		Segment profit margin	7.8%	7.3%	8.2%	7.6%	5.5%	6.8%
	Capital investment		1,736	2,050	2,956	2,369	2,049	1,663
	Depreciation		2,432	2,171	2,044	2,469	2,593	2,607
	Loss on retirement of fixed assets		0	0	0	0	0	0
	No. of employees		2,401	2,546	2,634	2,599	2,530	2,535
		Revenue per employee (JPY'000)	N.A.	16,265	16,064	15,905	15,169	13,810
		Profit per employee (JPY'000)	N.A.	1,187	1,313	1,216	830	942
	R&D expenses		1,383	1,426	1,375	1,124	1,132	1,034
		R&D expense ratio	3.2%	3.5%	3.3%	2.7%	2.9%	3.0%

Source: Company’s securities reports, results briefing materials, and other data
Note: The company transitioned to IFRS in FY03/19, so it did not release YoY comparisons with FY03/18.
Note: Segment profit reflects operating profit through FY03/17, and core operating profit from FY03/18.
Note: The company only announces aggregate R&D expenses for the Automotive Parts and Industrial Products segments. Shared Research has broken down and allocated the R&D expenses to each segment in proportion to their revenue.

Overview

The Automotive Parts segment (which also covers motorcycle products) is the core business of the company. In FY03/21, it posted revenue JPY35.0bn (43.0% of the consolidated level), segment profit of JPY2.4bn (48.3%), and a segment profit margin of 6.8%. Operations in Japan accounted for 31.5% of segment revenue and overseas operations for 68.5% (of which Asia made up 56.4% and Europe, the US, and all other regions 12.1%). Overseas revenue is the revenue amount generated by the company’s overseas bases. Shared Research estimates products for motorcycles make up roughly 20% of segment revenue.

Bando Chemical Industries 5195

Executive summary

Business overview

Earnings trends

Strengths and weaknesses

Key financial data

Trends and outlook

Quarterly trends and results

FY03/22 results (out May 12, 2022)

Summary

Q4 (three months, January–March 2022)

FY03/23 company forecast (out May 12, 2022)

Overview of company forecast

Company forecasts versus results

Medium- to long-term management plan

Overview of medium- to long-term management plan

Reflection on BF-1 stage

Evolution of global market strategy

Evolve products

Evolve manufacturing

Create new businesses

Evolve quality of management

Numerical targets for the BF-1 stage and outcomes (financial targets based on Japanese GAAP)

Four guidelines of BF-2 stage

Guideline 1: New business creation

Guideline 2: Core business expansion

Market map activities

Technical map activities

Customer convenience improvement activities

Guideline 3: Enhancement and evolution in manufacturing

Guideline 4: Work style innovation for both individuals and the organization

Numerical targets for BF-2 stage (financial targets presented on IFRS basis)

Changes in revenue composition

Progress to date

Medium- to long-term strategy (Automotive Parts segment)

Capture demand from mild hybrids

Capture demand for new applications

Capture new demand for products other than belts

Expand existing businesses with focus on repair market

Medium- to long-term strategy (Industrial Products segment)

Achieving success in belts for large agricultural machinery amid focus on priority industries

Launch and expand sales of new light-duty conveyor belts that take advantage of materials processing technology

Business

Business model overview

Types of power transmission belts and their functions

Bulk of the automotive power transmission belts are accessory drive belts (V-belts and V-ribbed belts)

Belts have a physical lifespan

Automotive synchronous belts at one time were replaced with chains

Basic business model

Capture replacement demand for belts (consumables) by providing repair parts

Establish rapid delivery system by relying on existing network

Increase in parts for new vehicles generates subsequent demand for repair parts

Core technologies underpinning business model

Processing technologies for materials such as rubber and elastomers are core technologies

Proprietary materials processing technology creates barriers to entry

A parts manufacturer with proprietary materials processing technology

Automotive Parts

Overview

The business model for the segment is described in the Basic business model section.